Continued credit union focus on commercial challenges essential - Patrick Casey, Registrar of Credit Unions

• The regulatory framework is tailored and proportionate and facilitates prudent growth by credit unions.
• Changes to the lending framework supports more diversified credit union lending activity.
• Financial health of the sector continues to highlight commercial challenges and the pressing need for business model development.

Addressing the Credit Union Development Association’s Annual Conference 2020 in Killarney, Registrar of Credit Unions, Patrick Casey, provided an overview of recent developments in the sector. He highlighted the importance of credit unions in the Irish financial services landscape, referencing their strong capital position, while noting depressed income generation, the impact of the low interest rate environment and high cost metrics across the sector.

He indicated the importance of ongoing focus on commercial challenges and the need for responsive business model change. In his comments, he highlighted the continued importance for credit unions to strengthen core prudential foundations across governance, risk management and operational capability.

On the subject of the regulatory framework for credit unions, Mr Casey highlighted the tailored and proportionate nature of the framework, which facilitates prudent growth by credit unions. He also referenced the positive validation of the Central Bank’s regulatory and supervisory approach towards credit unions, following the recent international peer review undertaken by the International Credit Union Regulatory Network (ICURN).

In terms of the responsiveness of the regulatory framework, he highlighted recent developments such as credit union current accounts, changes to the investment framework and facilitation of collaboration through credit union owned shared service entities (CUSPs).

He also addressed the regulatory framework changes the Central Bank has recently introduced to provide credit unions with greater flexibility to engage in longer term lending, including house and business lending, to support increased loan diversification. Mr Casey indicated that while the Central Bank would consider lending capacity changes in the future, any such capacity change would only follow credit unions demonstrating, amongst other things, a financially viable business line, the required competence and capability, more embedded risk management frameworks and access to support service type structures.

Registrar of Credit Unions Patrick Casey concluded: “The recognised trust and regard of members is a strong basis from which to grow new products and services. In transitioning, credit unions must retain the valued member-centric ethos they are recognised for. Members’ trust that has been built up over time can be lost very quickly if their best interests are not protected – which presents much food for thought as you seek to pursue a more complex business offering.”